Business for a Living Wage

Paying a living wage is good for business.

Raising the minimum wage creates more customers, more sales, and bigger profits. For example, recent studies have indicated that raising the minimum wage to $10 an hour would increase paychecks for North Carolina’s workers by $2 billion a year. That’s $2 billion in increased consumer spending at local businesses, boosting business sales, business profits, and creating more than 5,000 new jobs.

Raising the minimum wage helps small businesses reduce payroll costs by reducing employee absenteeism and turnover while simultaneously boosting productivity. Economists have long recognized that better-paid workers are more efficient, more effective, and more productive.7 Most importantly, increasing wages at the bottom rung reduces absenteeism and turnover—the two biggest drags on business productivity. Turnover requires managers’ time to review application, interview applicants, and provide on-the-job training and supervision for new workers once they are hired. Higher wages persuade workers to stay on the job longer.

These positive effects of a minimum wage increase outweigh the costs for local businesses and will not lead to layoffs. Taken together, the extra sales and stronger employee productivity more than outweigh the additional wage costs to businesses. And even where businesses do feel the need to reduce labor costs, 25 years’ worth of studies by labor economists have shown that businesses don’t respond by laying off workers, they respond by reducing workers’ hours—for example, a 10-percent increase in the minimum wage can reduce employee hours by about 1 or 2 percent.8 But low-wage workers still come out ahead—even after seeing their hours go down, they see a net increase in wages of 8 to 9 percent.